New Guidelines on the VAT Treatment of Short-Term Yacht Charter

Mr. Kenneth Camilleri | 23 Sep 2013

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On 29 July 2013 the Malta VAT department published new Guidelines on the VAT Treatment of Short-Term Yacht Chartering. The guidelines address situations whereby a yacht owner/operator contracts the use of his yacht for a consideration, with a crew or on a bare boat basis for less than 90 days.

Pursuant to Article 59a of EC Directive 2006/112, the short term charter of a yacht may be taxed in accordance with the portion of the yacht's use within the territorial waters of the European Union, rather than the standard rate of 18 percent.

Based on the reasoning that it is difficult to determine the period that a sailboat spends within and outside territorial waters of the European Union, the Commissioner of VAT deems that an acceptable measure would be the length of the yacht and its method of propulsion. As a result, no VAT will be levied on that part of a charter commencing in Maltese waters that is consumed outside the EU. The table below indicates the applicable established percentage proportions:

 

 

Yacht Type

% of the charter deemed to be taking place in the EU

 

 

Computation of VAT

Sailing boats or motor boats over 24 metres in length

30

30% of taxable value x 18%

 

Sailing boats between 20.01 to 24 metres in length

40

40% of taxable value x 18%

Motor boats between 16.01 to 24 metres in length

40

40% of taxable value x 18%

 

Sailing boats between 10.01 to 20 metres in length

50

50% of taxable value x 18%

Motor boats between 12.01 to 16 metres in length

50

50% of taxable value x 18%

All other boats

100

100% of taxable value x 18%

 

Input VAT

The owner/operator of the charter is entitled to claim input tax incurred on the fuelling and provision of the yacht, insofar as the fuel and/or other provisions are sold to the customer of the charter under a separate contract or they are invoiced separately from the charter service at the standard rate of 18% VAT.  

Furthermore, subject to normal provisions of the law, the supplier of the charter would also be entitled to claim input VAT incurred on fuel purchased for the outward journey of the yacht to its next port of destination, after the completion of the charter. 

The aim of the guidelines is to strengthen Malta's position in the yacht chartering industry and to encourage more super yacht charters to start from Malta.



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